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Friday, September 10, 2010

Over 1M Jobs Likely Created In August

The US private sector likely created over one million jobs in the month of August. That's in stark contrast to the paltry number reported last Friday by the major media outlets. That confusion can arise because the media outlets omit the word "net" when they report the latest job numbers. While everyone focuses on the "net" jobs figure, the Bureau of Labor and Statistics (BLS) also issues far-less-followed reports detailing total jobs created and destroyed.

Why is this an important distinction? Because the reality is that many American businesses are strong and growing, adding to their payrolls despite the slow-growth economy. But at the same time, companies operating in industries for which demand is no longer what it used to be (e.g. home-building, financial services) have been reducing in size. By looking only at the "net" number, the entire country looks like it's standing still. But in reality, jobs are essentially being transferred from where they are not needed to where they are.

On the first Friday of every month, the financial media will place great emphasis on the net jobs number that is reported for the previous month. But while the word "net" is often omitted, it is important to recognize that it is implied. In actuality, the US economy is likely producing over a million jobs every month, but excess jobs in industries operating with too much capacity have to be wound down, resulting in an uninspiring "net" number. For investors and job seekers, however, there are companies out there that are growing; they just have to be found.